Private equity giant Apollo to buy TRG, owner of Wagamana
- The Restaurant Group said it had rejected three previous takeover bids from Apollo
- Its board has unanimously recommended that shareholders approve the offer
- The British hospitality sector is struggling with rising food and energy prices.
Wagamama’s parent company will be the latest London-listed company to go private after it agreed to be acquired by Apollo Global Management.
The Restaurant Group told investors it had rejected three previous takeover bids from the US private equity giant but has now agreed a deal that values its shares at around £506m and the wider business at £701m. .
At 65 pence per share, the proposal represents around a one-third premium to TRG’s closing price on Wednesday and a roughly two-thirds premium to its average share price over the past 12 months.
The restaurant group shares soared 37.1 per cent to 66.3p on Thursday morning following the takeover bid announcement.
Acquisition deal: Wagamama owner The Restaurant Group agreed to be bought by Apollo
TRG’s board of directors unanimously recommended that shareholders approve the offer, which it expects to close early next year.
In March, the hotel company unveiled a medium-term strategy to increase underlying profit margins over a three-year period.
Since then, it has made “strong progress”, including two improvements in profits and healthy like-for-like growth in sales, volumes and market share.
The group hopes to achieve further margin growth by completing the sale of its loss-making leisure business, which houses the Frankie & Benny’s and Chiquito brands, to Cafe Rouge owner Big Table Group.
“As a result of the ongoing positive management actions and the margin increase plan we announced in March this year, the group has recovered well from the challenges of the pandemic and the cost of living crisis,” the chairman said. by TRG, Ken Hanna.
“TRG’s board remains confident in the plan but is aware of the premium and safe value of Apollo’s offering in the context of a challenging macroeconomic environment.”
Apollo believes the acquisition would allow TRG to access essential capital and “benefit from a long-term investment approach”, helping it address structural changes affecting the hospitality sector.
Alex van Hoek, a partner in its private equity business, said the injection of fresh capital was particularly important because “the outlook remains one of high interest rates and inflationary pressures.”
British restaurants, pubs and bars have struggled over the past year as rising food and energy prices have slowed their recovery from the Covid-19 pandemic.
TRG has performed relatively well in the face of this challenge, recovering to a pre-tax profit of £2.3m for the six months ended July 2 thanks to strong trading and lower impairment charges.
However, the company has faced backlash from activist investors during four consecutive annual losses and lackluster stock price performance.
Last month, Ken Hanna announced he would not seek re-election at the company’s next annual general meeting in January amid heavy pressure from investors for him to resign.
Meanwhile, chief executive Andy Hornby has experienced a major revolt over his compensation packages, with 45 per cent of voting investors in May opposing TRG’s pay report for the previous year, when Hornby received £792,000.
Stifel analysts commented: “TRG has arguably been ‘in play’ for some time, given activist interest and the ongoing strategic review.”
Russell Pointon, consumer director at Edison Group, said: “It will be interesting to see how activist shareholders respond to the deal.”
“The fact that the share price has reached a premium to the offer price indicates that the market believes that a high offer will be necessary.”
